By Somaya Joshua, Head: Commercial Property Finance: Pan Africa, Absa CIB.
What gets a property sector banker up in the morning?
As an organisation that actively funds commercial property transactions on the African continent, we’re looking beyond the bricks and mortar elements of a property transaction to understand how each deal fits into a broader ecosystem, and how it positively impacts both the environment and society in the long-term.
Across the property sector, we are seeing increased appetite for ‘Alternative’ asset classes and recent figures released by the African Development Bank says that the value of capital invested in alternative asset classes in Africa reached $100 billion in 2022, doubling from the $50 billion invested in 2021.
Three sub-sectors within the ‘Alternative Real Estate Asset Class’ seem to be attracting significant interest as infrastructure becomes a focus point for public and private sector stakeholders.
The first is the rise of data centres in Africa. Countries, including Kenya, Nigeria, and Morocco, have all recently seen a lot of activity in this space as investors onshore some of their technology infrastructure. We expect this trend to continue as data privacy, storage and transmission regulations intensify. This has been very topical for many of the large US technology organisations doing business in Europe and we expect that this will be a trend to watch in Africa, particularly as more international businesses establish a presence on the continent and primary internet connectivity improves. We expect these data centres to provide job opportunities and have an enhanced focus on minimising environmental impact. Many of the large technology companies have set and communicated net zero emissions targets that require the implementation of renewable energy, waste management and water efficiency measures at the data centre level to be realised.
The second sector which is looking interesting from an investment perspective is healthcare property. With the COVID-19 pandemic still fresh in the minds of investors and policymakers, it is clear that healthcare infrastructure is one which is ripe for innovation and investment. Research released in early 2023 indicates that over $11bn has been earmarked for new hospitals in Africa with Kenya, Nigeria and Ghana leading the way.
Healthcare infrastructure is also a key focal point for Development Finance Institutions and their partners. The US Trade and Development Agency through its “Coalition for Healthcare Infrastructure in Africa” has indicated it has tripled investment into the continent in the last financial year and this is expected to unlock $719m which will include electrification, connectivity, infrastructure for healthcare delivery services and regulatory support.
With a growing middle class, and in a post-COVID environment, there is a continuing need to address access to medical care on the continent proactively. We see promise in the approach Mauritius is taking (as an example) by positioning the Island as a medical tourism hub in the context of a global marketplace. According to data from the World Tourism Organisation, the sector was growing at double-digit rates annually prior to COVID-19 and momentum appears to be picking up again.
Thirdly, student accommodation is poised to attract investor interest in response to demand. The landmark deal that Absa closed with Acorn’s I-REIT has provided us with an opportunity to understand the demand dynamics for this asset class in growing markets like Kenya.
While property transactions are often long-term in nature, the demand for high-quality infrastructure in the fields of technology, healthcare and student accommodation highlight that there are many reasons to be excited about the sector and it is understandable that forward-thinking developers and entrepreneurs are not resting on their laurels.
